The End Of The Recession?
Everyone in the nation, and in fact all around the world, will have experienced the latest global recession in one way or another, either as an individual or as a company owner. It might not have had a direct effect on your own career or your private earnings, but the knock-on impact of businesses dropping income will have influenced the financial situation of the vast majority of folks. It was a really complex issue with wide reaching ramifications.
The actual downturn now seems to be over, or is at the very least on its way to an end, according to most financial experts. Although it might not yet be the moment to celebrate having made it through the economic turmoil, it should be a period to start looking ahead and planning for a future in a steady economy. It is time to seek some recession opportunities.
Businesses of all sizes, trading in all kinds of marketplaces are no doubt going to need to alter their operations in view of the economic downturn. This may well be after legislation is introduced to more closely control and keep an eye on the action of international financial organisations. Many firms may also be looking at methods to make themselves much more robust and have the ability to withstand economic instability in the long term.
The Recent Recession
The economic downturn of the early 21st century started in 2007 and slowly spread around the world over the next couple of years. Numerous economic analysts credited the cause of the economic downturn to be the drop in the U.S. property market, which in turn impacted the value of monetary products linked into real estate assets. The growth of the housing market up to that point had motivated homeowners to refinance their first homes in order to obtain second or third houses with a view to a long-term gain.
This drop in value then exposed the vulnerabilities of such a widespread system of credit agreements between global businesses, especially when much of the system was being supported by subprime lenders who were fiscal liabilities. A general lack of third-party control of the financial services market had permitted the creation of a highly complicated web of high-risk credit deals that relied upon a thriving economy.
The subsequent economic fallout saw many people lose their jobs as well as lose their homes, whilst many big, international organisations were forced out of business. Government authorities all over the world had to bring in major financial packages to assist their own banking systems, and still now certain first world countries are fighting to survive financially. Many consider it to have been the most severe financial period since the depression of the 1930s.
Not one individual market sector has been protected and as such planning consultancy Nottingham businesses suffered a very simlar fortune to those throughout the globe.
The Impact on Business
It is probably reasonable to say that the economic downturn had an impact on just about every enterprise around the world. Particular company models will have been more able to adapt to the additional financial pressure than others however they will have nevertheless experienced an impact at some part of their operations. If a key supplier or a key client goes out of business then that can have a bad impact upon your own business.
Many thousands of small and medium sized businesses have been pressured out of business because of the recent economic collapse. Many of these situations will have been fairly simple; as the general public begin to reduce their spending these companies lose income, and since margins are often extremely slender in a competitive market place there was extremely little room to allow for this drop. It’s a straightforward case of supply and demand not meeting in the middle.
Other cases were not so clear cut. There were circumstances where one business in a long supply cycle were unable to make it through and the knock-on impact would push every business within that supply chain to the brink of bankruptcy. The businesses which were able to survive have had to make incredibly difficult decisions to ensure they can survive the economic downturn.
Job losses have obviously been a very sensitive subject to the wide majority of us. It is believed that the present number of jobless individuals in the UK is over 2.3 million (almost 8% of the entire countries’ labourforce), and many of these will have been victims of the international economic crisis. These job losses lead to a larger decrease in general spending, which leads to a further fall in income for business.
The End of Recession
It does appear that the downturn is on its way to an end though, and this can only be great news for business. Gross domestic product (GDP) saw a climb in the UK during the final quarter of 2009 and total unemployment numbers dropped, both of which are indicators of an economy that is healing. This is not a view shared by everyone however.
Experts from the International Monetary Fund (IMF) have forecast that the UK financial system will actually get smaller over the course of 2010 and Mervyn King, the Governor of the Bank of England has warned of the risk of wide-spread unemployment continuing.
This uncertainty may be used as an advantage though, and businesses that are prepared to take a few risks or who are willing to alter their own operations to cater for a more cautious target audience could be set to make great profits.
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Price Sensitivity
On the outside it might appear that the obvious strategy to use whilst the overall economy is recuperating is to raise your own retail prices again to a level that affords your company some margin of comfort with regards to running expenses. As the market grows and people feel more secure in their jobs they will feel relaxed spending extra cash, so price increases should be an easy thing for shoppers to take on. This may not always be the case.
Actually, many companies might find that they have to keep their prices as low as possible because the newly provoked price sensitivity amongst the general public. Most of us will have had to tighten our belts during the last couple of years, and simply because the hardest of the economic downturn appears to be over, we are not all prepared to start spending freely just yet.
The phrase price sensitivity describes how important the element of price is to customers any time they are buying a particular item. If a fairly large price shift, for example increasing the cost of a car by £1000, doesn’t see a large drop in demand for that item then the product is said to be price insensitive. If a comparatively small change in price, say raising the price of a car by only £100, does see a drop in demand then that product is price sensitive.
As a result, the market place at large will take great interest in the costs of the items that they are purchasing. Many people will be watching out for discounts for everyday products that they require, and particularly their grocery shopping. Several of these products are necessities however. When it comes to buying luxury products, such as televisions, cars and holidays, the price of the purchase is likely to be an much more important decision maker.
Firms will be able to take advantage of this by utilising special discounts and price campaigns to attract new consumers into purchasing their own goods. Shoppers will be more likely than ever to change from their preferred brand names if the price is right, and companies that offer the best priced products are likely to stand to gain from this. Once these potential customers have become shoppers there is a great chance that they will remain faithful to their new product choice as the economy rebounds further, which could lead to additional spending at the initial price rates.
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Financial Security
People’s understanding of the economic system at large and how it affects us all has greatly grown in light of the economic downturn. Prior purchasing decisions may well have been made in accordance to the properties of the product and its value, but there is actually a new aspect that consumers will be considering now.
Recession Proofing
Many companies have endured bankruptcy in the aftermath of economic collapse. This has in turn has left countless numbers of consumers in a very poor situation. As people look to reinvest money into personal savings and shareholdings they would like to see that the company they are investing in has some sort of safeguard against future recessions.
Price Guarantees
One very visible feature of the latest recession in the Uk was the sharp drop in the interest rate. Once this change had worked itself through the high street shops and fiscal services organisations many people discovered that they were either suffering as a result or enjoying a monetary benefit. Either way, it undoubtedly elevated the profile of the effect that a fluctuating interest rate could have on every day economic products.
Consumers who are looking to open new savings accounts or private pensions may be worried that if the economic downturn does in fact drag on for much more time they will not be generating any significant interest on their investments. Actually, the tough economy might still take a turn for the worst and interest rates might drop again. In this scenario, a savings product that provides a confirmed rate of return becomes a really appealing choice.
The exact same could be said for customers with credit agreements. If the recession really is genuinely over and the global economy starts to recover more swiftly than many expect, then it might not be long before we see a growth in interest rates. This would signify that consumers would have to pay much more every month for their mortgages and loans. A company that could offer a secured rate of interest that is not linked to the base rate of interest could again entice many new customers.
A similar approach was used by a number of firms after the rate of Value Added Tax (VAT) increased from 15% to 17.5% in early 2010. They would offer “price freezes” on their goods for a certain time period in an attempt to retain current clients and bring new customers in.
Conclusion
Whether the economic downturn is totally over yet or not, this has functioned as a firm indication that no company can afford to be complacent in its own position of survival. Business managers must always seek to consolidate their position and improve their own operations wherever possible. The companies that manage to survive the economic downturn will have learnt valuable lessons.
